nep-ino New Economics Papers
on Innovation
Issue of 2007‒12‒19
six papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Discrete Innovation, Continuous Improvement, and Competitive Pressure By Ghosh, Arghya; Kato, Takao; Morita, Hodaka
  2. Venture Capitalists, Asymmetric Information and Ownership in the Innovation Process By Fabrizi, Simona; Lippert, Steffen; Norback, Pehr-Johan; Persson, Lars
  3. Measuring the Effectiveness of R&D tax credits in the Netherlands By Boris Lokshin; Pierre Mohnen
  4. Incentives for Interdisciplinary Research By Isabel Maria Medalho Pereira
  5. Business-Science Research Collaboration under Moral Hazard By Isabel Maria Medalho Pereira
  6. Boosting Manufacturing Productivity Through R&D: International Comparisons with Special Focus on Italy By Alessandro STERLACCHINI; Francesco VENTURINI

  1. By: Ghosh, Arghya (School of Economics, Australian School of Business at the University of New South Wales); Kato, Takao (Department of Economics, Colgate University); Morita, Hodaka (School of Economics, Australian School of Business at the University of New South Wales)
    Abstract: Does competitive pressure foster innovation? In addressing this important question, prior studies ignored a distinction between discrete innovation aiming at entirely new technology and continuous improvement consisting of numerous incremental improvements and modifications made upon the existing technology. This paper shows that distinguishing between these two types of innovation will lead to a much richer understanding of the interplay between firm incentives to innovate and competitive pressure. In particular, our model predicts that, in contrast to previous theoretical findings, an increase in competitive pressure measured by product substitutability may decrease firms' incentives to conduct continuous improvement, and that an increase in the size of discrete innovation may decrease firms' incentives to conduct continuous improvement. A unique feature of this paper is its exploration of the model's real-world relevance and usefulness through field research. Motivated by recent declines in levels of continuous improvement in Japanese manufacturing, we conducted extensive field research at two Japanese manufacturing firms. After presenting our findings, we demonstrate that our model guides us to focus on several key changes taking place at these two firms; discover their interconnectedness; and finally ascertain powerful underlying forces behind each firm’s decision to weaken its investment in traditional continuous improvement activities.
    Keywords: Competitive Pressure, Continuous Improvement, Discrete Innovation, Field Research, Location Model, Product Substitutability, Small Group Activities, Technical Progress
    JEL: L10 L60 M50 O30
    Date: 2006–12–08
  2. By: Fabrizi, Simona; Lippert, Steffen; Norback, Pehr-Johan; Persson, Lars
    Abstract: This paper constructs a model where entrepreneurial innovations are sold into oligopolistic industries and where adverse selection problems between entrepreneurs, venture capitalists and incumbents are present. We first show that aggressive development of a basic innovation by better informed venture-backed firms is used as a signaling device to enhance the sale price of the innovation. We then show that incumbents can undertake early, preemptive, acquisitions to prevent such signaling driven overinvestment, despite the risk of buying a non-productive innovation. Therefore, to exist in equilibrium, venture capitalists must be sufficiently more efficient in selecting innovation projects, otherwise preemptive acquisitions will take place.
    Keywords: venture-backed firm; innovation; signaling; overinvestment; interim development; M&A
    JEL: D21 L2 C7 D82 M13 G24 O3
    Date: 2007–11–15
  3. By: Boris Lokshin; Pierre Mohnen
    Abstract: This paper examines the impact of the Dutch R&D fiscal incentive program, known as WBSO, on R&D capital formation. Taking a factor-demand approach we measure the elasticity of firm R&D capital accumulation to its user cost. An econometric model is estimated using a rich unbalanced panel covering the period 1996-2004 with firm-specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we examine the impact of the R&D incentive program. We find evidence that the program of R&D incentives in the Netherlands has been effective in reducing the user cost of R&D and in stimulating firms’ investment in R&D. <P>Cette étude analyse l’effet du programme d’incitations fiscales à la recherche aux Pays-Bas, connu sous le nom de WBSO, sur la formation du capital de recherche. À partir d’une approche de demande de facteurs de production, nous mesurons l’élasticité du stock de capital de recherche au coût d’usage de la recherche. L’estimation économétrique se base sur un panel d’entreprises non-cylindré, couvrant la période 1996-2004, avec des coûts d’usage de la recherche variables. Nous trouvons que les incitations fiscales à la recherche ont effectivement baissé le coût d’usage de la recherche et ainsi stimulé les investissements en recherche et développement aux Pays-Bas.
    Keywords: R&D tax credits; panel data; crowding out; user-cost elasticity., crédit d’impôt à la recherche, données panel, coût d’usage à la recherche, crowding-out.
    JEL: O32 O38 H25 H50 C23
    Date: 2007–12–01
  4. By: Isabel Maria Medalho Pereira
    Abstract: This paper is a positive analysis of the driving forces in interdisciplinary research. I take the perspective of a research institution that has to decide how to apply its resources among the production of two types of knowledge: specialized or interdisciplinary. Using a prize mechanism of compensation, I show that the choice of interdisciplinarity is compatible with profit maximization when the requirement for the production is sufficiently demanding, and when the new interdisciplinary field is not too neutral. Productive gains due to complementarities of efforts is the main advantage of interdisciplinary organization.
    Keywords: scientific research, specialization, interdisciplinarity, adaptative-skills, prizes, standards
    JEL: D80 O31 O38
    Date: 2007–05–31
  5. By: Isabel Maria Medalho Pereira
    Abstract: I analyze, in the context of business and science research collaboration, how the characteristics of partnership agreements are the result of an optimal contract between partners. The final outcome depends on the structure governing the partnership, and on the informational problems towards the efforts involved. The positive effect that the effort of each party has on the success of the other party, makes collaboration a preferred solution. Divergence in research goals may, however, create conflicts between partners. This paper shows how two different structures of partnership governance (a centralized, and a decentralized ones) may optimally use the type of project to motivate the supply of non-contractible efforts. Decentralized structure, however, always choose a project closer to its own preferences. Incentives may also come from monetary transfers, either from partners sharing each other benefits, or from public funds. I derive conditions under which public interventio
    Keywords: collaboration, basic research, applied research, project, firms, universities, partnership governance
    JEL: L21 L24 L31 L33 O31 O32
    Date: 2007–09–07
  6. By: Alessandro STERLACCHINI (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale); Francesco VENTURINI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: Using data for twelve manufacturing industries of five developed countries over the period 1980-2002, we perform a dynamic panel estimation - based on a ECM model - of the long-run elasticity of TFP with respect to the stock of R&D capital. The highest elasticity is found for the US (0.51) while lower values arise for Germany (0.29), France (0.23) and Spain (0.22); the latter, in turn, are higher than that estimated for Italy (0.14). The unsatisfactory performance of Italian manufacturing industries is confirmed by further analyses in which a better measurement of TFP is provided and the time period extended. The above findings and their policy implications are discussed firstly in the light of the US-EU divide in terms of R&D-induced productivity growth and, subsequently, by focussing on the Italian case.
    Keywords: R&D capital stock, manufacturing industries, productivity growth
    JEL: L6 O3 O4
    Date: 2007–12

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